Friday, January 21, 2011

Construction Boom Overbuilds Tulsa

Real estate in the 1980s came in like a lion and went out like a lamb.
Riding the tide of a booming economy, rapid population growth and the generous lending practices stemming from banking deregulation, developers built Tulsa until all sectors of real estate grew fat.
Then a locally depressed economy, population exodus and investment-prohibitive tax laws changed all that in the mid 1980s. The city has been trying to recover since.
The new decade brought in a steady stream of new Oklahomans who were either transplanted by employers or came here because they'd heard there were jobs in Tulsa. While the rest of the nation was coping with a recession, Tulsa was booming.
In 1980, the typical home here sold for about $54,352, up from the $48,000 average price the previous year. Thirty-year fixed-rate loans were made at a lofty 16 percent interest rates or higher. Inflation was so rampant that the average monthly house payment for a home bought in 1980 was 33 percent higher than that of a home bought in 1979.
But in spite of high lending rates, home sales continued to remain strong, largely because of escalating home values, which in some cases inflated one percent of more per month.
Other housing markets were growing too. Apartment vacancies ranged from 5 percent to 10 percent, even after rapid developments in the late `70s. In Tulsa, the Hardesty Co. and Lincoln Property Co. were the largest landlords and one news account proclaimed 1982 as the "Year of the Apartment Builder."
By early January in 1983, builders set a record for filing permits for single-family residences: 153 in one month.
On the commercials side, investors and developers from across the country were eyeing Tulsa. Besides the physical needs for more space, banking deregulations in the late `70s allowed for non-traditional commercial lenders, such as savings and loans and insurance companies, to get in on the development action.
"It made it lucrative for people who were not bankers to get into ownership of these types of properties. Some of those people were aggressive," says Grover Bauer, president of Bauer & Associates Realtors and author of a real estate investment newsletter.
The outside developers and investors came in and the cash flowed, putting the city full swing into a building frenzy that covered all sectors of real estate.
The central business district downtown was experiencing a 2 percent to 3 percent office vacancy rate. Citywide, the vacancy was about 6 percent and developers began leaning more towards suburban development.
Broken Arrow, already a hot spot for home building, declared itself the fastest-growing city in Oklahoma. Right behind it were Owasso, Claremore, Glenpool, Collinsville, Bixby and Jenks.